ALEX MILLS: Alaska needs lift from oil

Alaska once was the 800-pound gorilla of crude oil production in the U.S. Today, Alaska's oil production is a shadow of what it once was. Even North Dakota produces more oil than Alaska.

Alaska has become a political football kicked around Washington, D.C., between the liberal environmental groups that want to preserve the pristine wilderness and conservatives who want to develop the nation's natural resources.

A recent story in the Oil and Gas Journal, titled "Resource plays could help refill trans-Alaska pipeline," points out that "in June 2012 Alaska's monthly contribution to total U.S. oil production has plummeted to 7.9 percent or 14,700,000 barrels as compared with a U.S. total of 187,803,000 barrels from a March 1988 peak of 24.9 percent or 64,668,000 barrels as compared with a U.S. total of 259,587,000 barrels. To the surprise of many, North Dakota's oil production recently surpassed that of Alaska for the first time."

Alaska's production has declined to the lowest on record since the oil pipeline was completed to Prudhoe Bay. Less than 25 percent of the pipeline's daily 2.1 million-barrel capacity is being used.

Alaska must reverse its decline in oil production soon, or the controversial pipeline will become uneconomical.

Few companies have explored Alaska for crude oil reserves, which has contributed to Alaska being a forgotten frontier for resource plays.

Resource plays typically are those from unconventional resources like shale. Shale exploration and production could solve much of the political debate because much of the shale reserves are not on federal lands.

Production from shale in Alaska likely will be price sensitive. With oil prices near $100 per barrel, this is an excellent time for companies to become active in Alaska. Additionally, Alaska offers generous credits for certain exploration activities, but legislators have not finalized a plan that could make oil production on the slope more lucrative.

Alaska looks to Texas as an example of a state with mature oil and natural gas reserves that turned around decades of declining production into a bonanza. Oil and gas production has increased so much in Texas, and elsewhere in the U.S., that some analysts have proclaimed the U.S. could become "energy independent" in the near future.

Absolutely amazing!

Now, if the federal government and environmental groups would get out of the way, Alaska could be a major player in increasing oil production, too.

Alex Mills is president of the Texas Alliance of Energy Producers. Contact him at alexm@texasalliance.org.